DLA Piper successfully obtained a second favourable opinion earlier this month on behalf of K-Sea Transportation Partners, dismissing claims against the independent directors of the oil barge operator.
The actions arose from K-Sea’s announcement of a merger with Kirby Corporation in 2011, which spawned a class action suit in Delaware alleging breaches of contract and fiduciary duties, and then the initiation of a securities fraud class action in the District of New Jersey by a K-Sea shareholder alleging that pre-merger misrepresentations caused stock to trade at artificially high prices. Both cases were dismissed with prejudice for the client.
New Jersey Federal Court judge William H Walls issued an opinion on 14 June, dismissing a putative class action alleging that K-Sea Transportation misled investors in 2009 about the company’s earnings and neglected to reveal the intended phasing out of its fleet of single-hull tankers.
In Rescue Mission of El Paso v K-Sea Transportation Partners, Walls found that the plaintiffs – who sought relief under Section 10b of the Exchange Act, Rule 10b-5 promulgated thereunder, and Section 20 of the Exchange Act – were aware of the risks when they invested in K-Sea and that K-Sea had no obligation to release financials for not-yet-completed, upcoming fiscal quarters.
The New Jersey ruling follows a decision in Norton v K-Sea Transportation Partners by the Delaware Supreme Court on 28 May, which affirmed dismissal of a complaint by unit holders in April 2012. This action was based on a suit filed by a group of the K-Sea limited partnership’s unaffiliated former common unit holders in the Delaware Court of Chancery, shortly after K-Sea’s merger announcement with Kirby, against the general partner and board of directors of K-Sea.
On appeal, the Delaware Supreme Court affirmed the Chancery court’s ruling. The court held that the limited partnership agreement between the parties contractually required the general partner only to act in good faith, and the general partner exercised its good faith when it obtained a fairness opinion prior to the merger.
DLA Piper’s interdisciplinary team included Roger Meltzer, Tim Hoeffner, John Vukelj and Nickie Cheney in New York, John Reed and Scott Czerwonka in Delaware and John Pendleton in Florham Park.